In practice, how are the common stock and the preferred stock issued and recorded based on what I stated on the essay?

Families used to invest by depositing money into bank accounts hoping high rates of interest. Despite this, they can also invest in stocks. The question is, what is stock and the type of stock?

Stock is the ownership in a corporation. If a corporation sells stock, a person can give money in return for a certificate called "a stock certificate", which proves that he has the possession of a stock. After buying a stock, the person is called "stockholder", the investor. The stock certificate includes the number of stocks owned by the stockholder and the "par value", which is defined as the legal capital that is required by the investor's state law. The par value is always insignificant amount and is recorded separately in a stockholders' equity account. In regard of the number of the stocks owned, if a corporation issued1, shares and an investor bought shares, the investor has a% ownership interest ( stocks out of1,,/1,) in the corporation and the other investors have the remaining% ownership interest. Buying a stock certificate means that the stockholder is an owner and therefore can sell the certificate through a stockbroker, an organization that buys and sells stocks through a stock exchange. the current value of the stock certificate, hence,fluctuates. It is as if the investor were in a market. Investors can buy a number of stocks and sell them.

Stocks are classified into, as far as I am concerned, common stock and preferred stock. First, the common stock gives the investor the right to vote per share, per stock he owns. By voting, he can elect the company's board of directors, for example. The common stock, also, gives "preemptive rights", which allow the investor to increase his proportional ownership. For instance, if the corporation issued new stocks, the common stockholder can buy any of the new stocks. On the other hand, the common shareholder is the last one to receive dividend payments, an amount of the corporation's profits. To explain, if net profit in the dividend account was $6,,, the the common stockholder will get $6,, if he owns1% of the corporation's stocks, after the preferred stockholders are paid in full. Second, the preferred stock don't give preemptive rights, and their holders are paid fixed amount, not in percentage terms. For instance, the investors who owns preferred stocks are paid $1, instead of1% of $6,, of net profit. Therefore, the main advantage of the preferred stocks is that they have a greater claim on the company's assets, giving their holders the priority of being paid before the common stockholders. The two types of stock are different in terms of the right to vote, preemptive rights, priority, and the way the investor are paid.

In sum, you don't deposit an amount of money and wait. You invest in stocks instead--in other words you have ownership and privileges.